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Mixed VAT and VAT returns etc

Question asked by Alistair Wood 6 years ago

I have a property development company where some supplies are exempt and some are zero rated (exempt is classed as non vatable supply and zero rated is classed as vatable supply at 0%). What that means is I can reclaim input VAT on the goods and services which are specifically for the zero rated supply and I can reclaim a proportion of the VAT on the general overheads to the proportion of zero rated supplies overall. Can you tell me how I would best manage this within Clearbooks where I want to be able to submit VAT returns to HMRC? I am also going to be using the CIS functionality in case that makes any difference as the CIS amounts need to be accounted for EXCLUDING the vat so that might limit options.

8 Replies

Hi Alistair - for general expenses you'll have to manually calculate the proportion of VAT claimable on each expense and enter the VAT applicable using the "Manual" VAT option.

Hi Alistair,

I do believe that when you create an invoice you have the option to select the VAT rate/treatment to apply each time. You can choose to have it 0% or exclude from VAT return as appropriate.

I hope that this helps.

Chris

Hi Alistair - for general expenses you'll have to manually calculate the proportion of VAT claimable on each expense and enter the VAT applicable using the "Manual" VAT option.

Thanks for input so far.

I was thinking of a couple of the options below, do these do anything above just doing the manual vat option? Also, is strictly speaking marking an item as zero input vat even though it had vat on it, but then just putting in Gross amount going to cause a problem on vat returns to HMRC?

For example Accounting fee's 1000 + 20% vat total and assume a split of 50/50 recoverable and non recoverable. Invoice goes through as Line item one - 0.5 x £1000 net + £200 vat = £500 + £100 Line item two - 0.5 x £1200 Gross = £600 marked as non vatable

End result is invoice total still £1,200 which is what was actually paid over in cash terms but the £100 vat is marked as vat and therefore would go into vat returns to HMRC but the £100 that was not would still reconcile value wise but would not go to HMRC as reclaimable.

I guess another way would be to split out line item two into a third line for the non recoverable vat and create a cost of sales account to put it into. That way you could then later go back and see what non recoverable vat you had suffered should HMRC want to investigate the apportionment ratio. E.g. Line item one - 0.5 x £1000 net + £200 vat = £500 + £100 Line item two - 0.5 x £1000 Gross = £500 with no vat Line item three - £100 - Non recoverable vat

NB I guess you don't have to go with the 0.5 quantity method, it just do that as it means Clearbooks works out all the figures on the fly which if you were using a less easy to calculate ratio might be a useful time saver.

Hi Alistair,

In your scenario if you set up the invoice with two line items as below this would mean that only £100 would show in box 4 on the VAT return and £1100 would show in box 7 (this would be reduced to £500 in box 7 if you excluded line 2 from the VAT return).

file

Your second suggestion would have the same outcomes on the VAT return depending on whether you zero rate or exclude items 2 and 3. I would definitely suggest getting an accountants view on the best method to use.

Hello there,

Following up on this topic. As a charity, with a cafe arm, we also have item that are exempt, zero and standard rated, as well as some things which need to be apportioned.

An example of apportionment might be a printer that was bought for shared use (say 50%) between the charity and the cafe. In this case if the printer was £96 inc vat, we'd be looking to claim back 50% of the £16 VAT, representing the use by the cafe, ie £8. Obviously an alternative way to reach the same number is to look what half of the VAT rate was.

Are there any pitfalls if we set up a manual VAT rate of, for example 10%, for the scenario where something is standard rated but being 50% apportioned??

Thanks for your thoughts.

Toby

Hi Toby,

This is a query that would need to be escalated to our Support Accountant. She was not in the office today, but I'm sure she will be in touch to answer your query as soon as possible.

Hi Toby

Yes, you could have a manual VAT rate but if you were applying it to the whole cost it would not be 10% but 9.0909%, this is because you have to treat as cost the other half of the VAT not claimed. In other words, with your printer:

Cost £88 + VAT @ 9.0909% £8 = £96.

As a charity though I'd have thought you'd need to record such expenditure separately over funds/activities and would have anticipated the 2 line solutions mentioned above, ie one at £40 + 20% VAT and the other at £48 with no VAT?

Thanks once again Paul.

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